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As we are in year three of the non-stop AI talk, with no signs of it slowing down anywhere in sight, it was hard to see anything else being able to break through and take the spotlight away from it. And if something would’ve been able to breakthrough, absolutely nobody could’ve seen tariffs and trade wars being the thing that did it. That was until a couple of weeks ago. But now the global focus is on tariffs and trade wars, bond markets and dollar valuations.
But can all of this tariff talk do more than just displace the global AI discussion in the short term? Or better yet can it actually impact the march to bring AI in all its forms into a central/foundational presence in the enterprise? That was the focus of a conversation I recently had with some of the brightest, respected and most influential minds in the industry: Nicole France, Esteban Kolsky, Jon Reed and Bob Stutz.
Below is a highlight reel of an hour long deep dive into if what happens with the tariff and trade situation will impact AI’s march into the enterprise, and how it might do so, along with an edited transcript. To check out the full conversation go to https://youtu.be/m6uvomALNXY?si=3WnAmS4twQGMlBZb
Quick takeaways via Perplexity:
### **Impact of Tariffs on AI and Global Trade**
– **Bob Stutz** highlights that tariffs disrupt global supply chains critical to AI development, as components for data centers (e.g., chips) are primarily manufactured outside the U.S. This could slow AI progress and lead to increased automation in the U.S., potentially accelerating job losses.
– **Esteban Kolsky** emphasizes that the U.S. economy thrives on services rather than durable goods. He critiques the focus on manufacturing nostalgia, arguing that forcing a return to factory jobs undermines the service-driven middle-class economy.
– **Jon Reed** warns that tariffs exacerbate global instability and economic volatility. Companies may prematurely adopt immature AI technologies for cost-cutting, leading to operational inefficiencies and workforce reductions.
### **Automation and Workforce Challenges**
– Increased automation could replace jobs in white-collar sectors more rapidly than in manufacturing due to limitations in robotics for physical tasks.
– The misuse of AI for headcount reductions risks overshadowing its potential to enhance productivity and innovation.
### **Global Collaboration and Innovation Risks**
– **Nicole France** stresses that U.S. trade policies, including restrictions on student visas, harm international collaboration and intellectual exchange. This could isolate American companies from global innovation networks.
– China is positioned as a leader in building intellectual capital by attracting global talent and fostering R&D.
### **Economic Resilience vs. Zero-Sum Thinking**
– The “zero-sum game” approach to trade, advocating for policies that expand economic opportunities rather than focusing solely on competition.
– Co-locating R&D and manufacturing is cited as a way to boost innovation through proximity-driven collaboration.
### **Potential Tariffs on Services**
– European leaders are thinking about proposing tariffs on U.S. services, which could undermine America’s dominant position as a net exporter of high-margin services like AI development.
In summary, protectionist trade policies could hinder AI advancements, disrupt global collaboration, and harm both economic resilience and innovation. But the group discussion advocates for forward-thinking strategies focused on intellectual capital and service-based economies rather than manufacturing nostalgia.
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Edited transcript
Brent Leary: Over the last week or so we’ve been saturated with liberation and tariffs and trade wars and bond markets. And I just started thinking I wonder if there’s some sort of tie into what’s going on with AI. Bob you’re over in Germany. I don’t even know what the perspective is over there but tell us a little bit what’s going on.
Bob Stutz: Let’s just say it’s not a good time to be American living in Germany. I don’t think a lot of people disagree with the whole concept of tariffs. I think it’s the implementation that’s been the problem. There has been an imbalance of trade. There’s not free reciprocal trade at the end of the day. Let’s put it that way.
It’s pretty important and its effects on AI I think are going to be pretty dramatic if they don’t come to some closure on these things pretty quickly. Chips have been excluded from this but it’s not just about the chips, It’s about everything. It’ll affect power consumption because all those things that you know; all those components that go into a data center for instance they’re not made in the U.S. They’re made in Japan. They’re made in China. They’re made in South Korea. They’re made in Taiwan. I think it’s going to actually have a dramatic effect on the progress of AI actually in a lot of ways.
More importantly I think there is a byproduct that could pop up that will not be pleasant for people in the U.S and it could lead to even a larger loss of jobs. Companies may decide okay it’s time to just invest in robots because it’s cheaper in the long run. It could have this effect that it actually increases the automation in the U.S. It could increase it by several years actually.
Esteban Kolsky: Trade balance is focused on durable goods that are produced. Cars and refrigerators and chipsets and motherboards and things that are like you know durable. But the margin that we get in those things is minute compared to the service economy that we’ve built in this country for the last 40 years.
Worldwide as a service economy we are like killing it. We have margins that are like you know ten X the margins of durable goods. We have a presence in the world that is not only impressive but astonishing, how amazing we’ve mastered just about everything around in the world. We create services and we create services to write things like AI for example that nobody can tell for the most part.
So we’re focusing on trading balanced and durable goods But you know what I don’t want to work in a factory putting shit together Most people don’t want to do that So why would you force the people in this country that have grown accustomed to a different lifestyle a middle class lifestyle and with a different economy over the last 40 years to go back to something just based on nostalgia?
Jon Reed: Esteban’s right. Like tariffs are our legacy artifact. We live in a globalized world and if we’re going to stick to our guns and try to pull nationalist movements on each other and try to say oh we’re better than you – just because we are – it’s going to be highly unhealthy for the global economy.
Will it have impact on AI? I think it will. I think what we’re really doing is we’re talking about a future world that’s going to be more and more unstable, and more and more volatile. And this only adds a whole other layer to that. Shit’s going to be expensive. So the question going forward is not necessarily just about tariffs. How are companies and software vendors going to respond in a world that’s highly unstable and expensive.
I think there’s some really cool things that can come out of that. And there’s some things I’m really afraid of that are going to come out of that. One thing companies are going to do is they’re going to try to achieve whatever ruthless operational efficiencies they can as kind of a squirrel in the headlights response to everything being expensive and unstable. And unfortunately that’s going to mean premature headcount reductions based on immature technology that isn’t ready to replace a lot of those heads.
They’re going to learn the hard way that AI is not ready. If companies are more sensible there’s actually some better paths that can be taken. I don’t actually think robotics are a great candidate because, look, if companies could have replaced all the humans in manufacturing plants by now they would have. There’s some very specific issues around physical movements and robotics that are going to make those transitions more difficult.
But in white-collar settings I think all bets are off. 3 months from now if you can get a human on the phone in any service department for any company in America I’ll be shocked. That’s not the stuff that AI is best at And that’s the tragic part of it is that AI can actually be used to augment and enhance what we’re doing and make the world a better place. And I’m afraid we’re going to lose that part of the conversation right now.
Brent Leary: The European folks, I think it was Macron, was saying part of what their response to all this might be tariffs on services and digital things.
Nicole France: We are a massive net exporter of services.
Brent Leary: What impact do you think that could have on what’s going?
Nicole France: I think this is a really critical issue. And I think It is tied to both a massive kind of own-goal potential here that the US has created, without getting into pointing the obvious fingers. But the other aspect of this that I think is really crucial is that it is sowing such a massive amount of ill will.
I think the thing that is far less easy to quantify, because it is so intangible, is the importance of collaboration and experimentation. What potentially happens is that Americans and U.S companies are cut out of inspired creative, collaborative activity because it’s just simply a reaction on a very human level to complete dumbassery.
Bob Stutz: Just think about what’s happening with all the student visas getting axed.
Nicole France: Talk about shooting yourself in the foot.
Bob Stutz: We depend on those students coming from China, from Japan, from Taiwan from other countries; South America. And if that’s going away who’s going to replace all that?
Nicole France: Thomas Friedman had a great article recently where he’s talking about how he’s been to the future and it’s China. Because this is exactly what they’re doing. And they’re not just building manufacturing capability, they’re building the intellectual base to draw people from all over the world.
Jon Reed: The real asset for the U.S wouldn’t be forcing companies to put some really crappy manufacturing jobs back here that you can’t live on anyway. It would be creating the next generation of intellectual capital by investing in a diverse set of talent, because the only moat in a modern economy you can hope to build is the moat based on your own creative brilliance that is manifested in your business and your services.
Nicole France: I’m reminded of a conversation I had many many years ago with a former colleague who was a physicist by training and ended up in manufacturing and then in ERP and then you know in the analyst world. The conversation was very much about the importance in chip fabrication of having R&D and manufacturing physically co-located because there is so much innovation that can only happen rapidly when those things are in physical proximity to each other. That’s maybe an extreme example of where that is often true but it’s certainly not the only one and i think there’s infinity disaggregation of so many things both in manufacturing and honestly in my opinion in services too that would probably benefit from kind of the pendulum swinging back the other way.
I think there’s room for innovation that we wouldn’t be able to find otherwise. It is also about economic resilience and things like national security. It is about a whole range of issues here, not just economic top dogdom. And I think part of the challenge is we are in an environment where if things work effectively the pie keeps getting bigger. But, at the moment, the dogma seems to be very much about a zero-sum game view of trade. i And I think that is probably the most harmful aspect of this whole thing.